3rd Most Dynamic City -Lima

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Re: 3rd Most Dynamic City -Lima

Postby alan » Mon Dec 06, 2010 8:34 am

Thanks, Tupac. Good article. Here is a more direct link to reach same: http://www.theatlantic.com/business/arc ... rld/67234/

The abstract on Lima reads:

3 :: Lima, Peru

The top-ranked city in South America is, surprisingly, not in BRIC-leader Brazil, but the capital of its neighbor Peru. Lima benefits from rich commodity resources -- gold, copper, lead and zinc -- that are in high demand throughout the world, especially the United States and in large countries undergoing modernization, such as China. Lima has also benefited from its stable banking industry, which attracted considerable capital when world markets froze in the credit crunch that kicked off the financial crisis.
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Mon Dec 06, 2010 1:24 pm

Alan wrote:The abstract on Lima reads:
3 :: Lima, Peru
The top-ranked city in South America is, surprisingly, not in BRIC-leader Brazil, but the capital of its neighbor Peru. Lima benefits from rich commodity resources -- gold, copper, lead and zinc -- that are in high demand throughout the world, especially the United States and in large countries undergoing modernization, such as China. Lima has also benefited from its stable banking industry, which attracted considerable capital when world markets froze in the credit crunch that kicked off the financial crisis.


To talk about Lima. As the one of the (3rd) most dynamic cities in the world is a complete fallacy and very good PR. While it is known that Peru remained pretty much unaffected by the worldwide casino economy debacle due to its banking policies, what is not being said is why is it that 'considerable capital', read speculative capital, has been steadily flowing to Latin America in general and more specifically Peru, soon after the worldwide crisis started. By the way, the Brookings Metropolitan is a neo liberal think tank which have Goldman Sachs and other corporation CEOs as trustees, no wonder nothing is said about the real issues.

Alan wrote:From the article:
"We were especially interested in the emergence of Latin American capitals, so we took a close look at Lima, Peru [number 5]," said Alan Berube, research director at the Metropolitan Policy Program, who wrote the report with LSE Cities. "It has a big commodities sector that not only sustained it through the recession but also propelled its growth thanks to huge demand out of China and India. Like a lot of other Latin American capital cities, it was also a safe haven for capital during the global economic crisis. That fueled investment and income during the crisis and continues to do so now."


It's a new form of warfare through finance where the BCRP in collusion (by accepting to play their speculative game) with US Banks and their customers create a credit competition to buy resources, public and privatized infrastructure, bonds, corporate stock ownership and of course, real estate.
As of late, the US administration has resorted, due to its loss of competitiveness for markets around the world and inability to reduce trade and fiscal deficits, to provoking a subtle currency war trying to increase its market share at the expense of economies like LA et al around the world. This explains also why the continuous high influx of speculative funds or 'hot money' into Latin America, in this case Peru, where we're currently witnessing an overvaluing of currency and provoking a speculative bubble mostly in real estate, (giving the illusion of "progress" and "boom") while at the same time encouraging excessive liquidity and consumer debt through EZ credit.

Alan wrote:From the article:
Nobody knows the next bubble until it has burst. But there are candidates. Some economists point to Asian asset inflows. Other point to the Latin American capitals, which might be overly dependent on rising commodity prices in the short and medium run. Lima is plowing much of its capital into massive construction projects, which has to concern students of the worldwide real estate crash.


The above statement just confirms it.
Therefore, a more accurate head line for the speculators' PR article would be:
"The cities most affected by the TRADE/CURRENCY war", LOL! 'cause after all, cui bono?
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Tue Dec 07, 2010 6:50 pm

I think you are reading too much into the article. All it seems to be really saying is that Lima has one of the highest growth rates of any world city in terms of income and employment since the world recession hit in 2007/8. This I think is true even if it is rather old news for us on expatperu.

I think if you told poor Limenos that an increase in income and employment was due to a currency trade war being waged against them they would reply that they would like that war to continue for as long as possible.
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Tue Dec 07, 2010 8:15 pm

tomsax wrote:I think if you told poor Limenos that an increase in income and employment was due to a currency trade war being waged against them they would reply that they would like that war to continue for as long as possible.


Who cares, right?....poor Limenos....until the bubble burst and they're left holding the bag (in debt up to their ears)...ignorance is bliss.
Last edited by JoshuS on Wed Dec 08, 2010 1:03 pm, edited 2 times in total.
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Re: 3rd Most Dynamic City -Lima

Postby Alpineprince » Tue Dec 07, 2010 9:48 pm

tomsax wrote:I think if you told poor Limenos that an increase in income and employment was due to a currency trade war being waged against them they would reply that they would like that war to continue for as long as possible.

I think they would be happy to "finally" win a war PERIOD.
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Wed Dec 08, 2010 1:05 pm

Alpineprince wrote:I think they would be happy to "finally" win a war PERIOD.


Hardly.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Wed Dec 08, 2010 1:33 pm

Unlike Josh, I don´t see the sky falling any time soon. There is no doubt that we are in a mineral boom, but Peru is diversifying its economy and year after year exports more fruits, vegetables, clothing, and attracts more tourists. Besides that, the stable and continuous growth that we are experiencing dates back eighteen years, far preceding the recent crisis in the US and Europe that has freed up speculative capital that is looking for a temporary home.

The central bank, far from being in collusion with overseas short-term rent seekers has raised reserve requirements and taken other steps to mitigate the flight of speculative capital. Peru´s per capita GDP has also recently inched above the $5000 dollar per capita figure and the country has received investment grade accreditation from major ratings agencies; these are two huge green lights that will trigger the further entry of money to finance long-term capital investment. Poverty has dropped in the past 20 years from 50% to roughly 30% and continues to lower; Peru has a young workforce that has become increasingly better educated and the city is being tied together by a new bus system and an electric train, which will also raise productivity. We have also had one of the longest periods of democracy (notwithstanding a couple authoritarian years under fujimory) on record, and we have experienced a decade and a half of economic growth without inflation.

I don´t know if Lima deserves a third place on this listing, but I have a hard time swallowing the argument that we are living a short-term boom based on anomalies in the system in the wake of the international crisis.
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Thu Dec 09, 2010 5:41 am

Economies are cyclic. I can see a correction happening in Peru. May not
Turn out to be a bubble but I would not heavily invest my money in
Peru at this time. It is too late in the game.

The banking/credit figure are cooked up. Report are stating that delinquencies
Are much higher, to hide them banks are refinancing consumer debt
Which means bad credit is being kept off the books.
Usually banks do not extend credit if you fall behind.
Bad credit is reported even when you refinance in the usa.
So for all the boom you hear about in Peru there will come a correction/bubble.
-imho
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Re: 3rd Most Dynamic City -Lima

Postby alan » Thu Dec 09, 2010 11:02 am

tupacperu wrote:Economies are cyclic. I can see a correction happening in Peru. May not
Turn out to be a bubble but I would not heavily invest my money in
Peru at this time. It is too late in the game.

The banking/credit figure are cooked up. Report are stating that delinquencies
Are much higher, to hide them banks are refinancing consumer debt
Which means bad credit is being kept off the books.
Usually banks do not extend credit if you fall behind.
Bad credit is reported even when you refinance in the usa.
So for all the boom you hear about in Peru there will come a correction/bubble.
-imho


You are 100% that economies follow cyclical patterns, but I see much more boom than bubble in Peru right now, based on employment figures, the accumulation of long-term investment capital, the young age of the workforce, and general stability. Maybe real estate is maxing out (I am not saying overpriced), but there are tons of other investment opportunities. The debt you worry about, personal, business and sovereign, is within acceptable proportions of the GDP.

I guess i see the glass as half full on this one!

Alan
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Thu Dec 09, 2010 12:41 pm

Alan wrote:Unlike Josh, I don´t see the sky falling any time soon.


It's called properly contextualizing information, presenting them as they are within current worldwide events. Something PR articles like the above deliberately don't delve into for obvious reasons. You can leave your "the sky falling anytime soon" theory for religion.

Alan wrote:There is no doubt that we are in a mineral boom, but Peru is diversifying its economy and year after year exports more fruits, vegetables, clothing, and attracts more tourists. Besides that, the stable and continuous growth that we are experiencing dates back eighteen years, far preceding the recent crisis in the US and Europe that has freed up speculative capital that is looking for a temporary home.


Peru may have diversified its exports through FTAs, but at what cost? This is not part of the discourse either, again cui bono? What kind of policies were implemented to ensure a more fair distribution of FTA profits? Last year, only a handful of people benefited. For example, only 3% of the land is used for agricultural exports that most benefits the PTPA with the US. On the other hand, almost three quarters of the land is used for staples like wheat, cotton and maize which are affected under the agreement since these are sensitive products for the US since it subsidizes producers of these commodities. And considering the monetary restrictions in countries like the China for example, this Peruvian blistering commodity expansion is not sustainable either. Not to mention the FTA with China that leaves a lot to be desired in regards to environmental and labor standards for Peruvians, within a differential advantage framework greatly favoring China as well. That's certainly not "growth" in real terms.

Alan wrote:The central bank, far from being in collusion with overseas short-term rent seekers has raised reserve requirements and taken other steps to mitigate the flight of speculative capital. Peru´s per capita GDP has also recently inched above the $5000 dollar per capita figure and the country has received investment grade accreditation from major ratings agencies; these are two huge green lights that will trigger the further entry of money to finance long-term capital investment. Poverty has dropped in the past 20 years from 50% to roughly 30% and continues to lower; Peru has a young workforce that has become increasingly better educated and the city is being tied together by a new bus system and an electric train, which will also raise productivity. We have also had one of the longest periods of democracy (notwithstanding a couple authoritarian years under fujimory) on record, and we have experienced a decade and a half of economic growth without inflation.
I don´t know if Lima deserves a third place on this listing, but I have a hard time swallowing the argument that we are living a short-term boom based on anomalies in the system in the wake of the international crisis.


I'm with Tupac on this one "The banking/credit figures are cooked up." BCRP is linked and subservient to world major central banks, to think that Peruvian economy is sanitized and immune from the worldwide banking system is naiveté at best. Investment grade accreditation from major rating agencies, such as Moody's? This is a non sequitur and has to be a joke. Moody's was one the "most respectable" credit rating agencies that purportedly and in collusion with the banksters rated AAA dubious and shady credit information that eventually led to the casino economic debacle. That's a big red flag for anybody with some knowledge of history. That "poverty has dropped in the past 20 years from 50% to roughly 30% and continues to lower" (!!!???) is truly a miracle in statistics BS, the INEI official stats sure does a very good job. Government propaganda, a kool-aid I never drink. You need to walk Lima more and travel the country more often.
Without rosy glasses, a trade currency war is being waged against Peru, a war most Peruvians will definitely not win.
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Thu Dec 09, 2010 1:32 pm

When you say a currency war is being waged against Peru I guess you mean that the US monetary policy is reducing the value of dollar to support its exports and to try and limit imports. It's true the US government is doing that but I think you are falling into the trap of always seeing a country like Peru as a victim.

Yes, the sol is appreciating in value against the dollar and generally investers around the world have increasing confidence in the Peruvian sol and a much reduced confidence in the dollar. Exporters in Peru and in many other countries complain about this because they rely on a strong dollar for demand from the US. But overall is this so bad for the rest of the world and good for the US? For most Peruvians a stronger sol means cheaper imported goods. I don't have the latest information, but are Peruvian exports dropping? I doubt it. In times of a weakening sol/inti were exports booming? No, quite the opposite.

The US is devaluing the dollar not so much because they are waging a currency war but because they are desperate to prop up the economy. Meanwhile the economy of Peru is sitting relatively pretty.

I agree that the FTA can be a problem for cotton and maize producers. I'm not sure if producers in Peru have had time to adjust for that. But on the other hand if Peruvians are getting US subsidised products many consumers will be saying "thank you very much US government for helping me out" and then finding ways to sell Peruvian products back to the US at the full price! Again you are always seeing the US as the winner and Peru as the loser/victim.

In some areas that is true but overall reality is much more complicated than that.

Rather than critising policies that increase income and employment you should be arguing for change that keeps those things on track but helps all Peruvians benefit from the growing economy. Yes, the extreme free marketeers and liberatarians won't be saying anything to promote that but that doesn't mean that you have to argue for throwing out the baby with the bathwater.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Thu Dec 09, 2010 3:47 pm

JoshuS wrote:]

Peru may have diversified its exports through FTAs, but at what cost? This is not part of the discourse either, again cui bono? What kind of policies were implemented to ensure a more fair distribution of FTA profits? Last year, only a handful of people benefited.
Without rosy glasses, a trade currency war is being waged against Peru, a war most Peruvians will definitely not win.



Well, at least I am wearing glasses. I´d invite you to travel north to Trujillo to visit some of the huge industrial farms that are employing tens of thousands of people, all on planilla. Or go south to Ica where land owners are complaining that they cannot find laborers.

And if you prefer not believe statistics that show that poverty has dropped roughly 20% in the past 20 years, and continues to drop, that´s your choice. But I prefer to work with the information at hand which is corroborated by the BCRP and other independent agencies. There have been some complaints about the veracity of the poverty figures put out by the INEI, but so many other figures indicate that the country is growing wealthier year after year, and that poverty is dropping.

All I am trying to point out is that, unlike what seems to be a common opinion on this board, Peruvians are not verging on a credit default, and more people are working (and paying taxes!) than ever before. Of course we are a tiny economy that can do nothing to change the vagaries of the global currency movements, but Peru has done the absolute best under the circumstances and has proportionally healthy reserve requirements to stave off the worst short term impact. Investment is coming in, we are exporting more, AND IMPORTING MORE!

Even if the US policies end up reducing the value of their own currency in this print-fest they have going on, the global shock will cause the Peruvian currency to drop too. We are a pro-cyclic economy here, and if the USA stops importing goods from china, made with Peruvian raw materials, the price of raw materials drops, and eventually Peru, and the nuevo sol, takes a hit.

Please don´t misunderstand me. I don´t discount that we live in "interesting times" globally, but Peru is doing very well under the circumstances.

Invest in Peru!

Saludos.
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Thu Dec 09, 2010 7:33 pm

Alan wrote:
JoshuS wrote:]

Peru may have diversified its exports through FTAs, but at what cost? This is not part of the discourse either, again cui bono? What kind of policies were implemented to ensure a more fair distribution of FTA profits? Last year, only a handful of people benefited.
Without rosy glasses, a trade currency war is being waged against Peru, a war most Peruvians will definitely not win.



Well, at least I am wearing glasses. I´d invite you to travel north to Trujillo to visit some of the huge industrial farms that are employing tens of thousands of people, all on planilla. Or go south to Ica where land owners are complaining that they cannot find laborers.

And if you prefer not believe statistics that show that poverty has dropped roughly 20% in the past 20 years, and continues to drop, that´s your choice. But I prefer to work with the information at hand which is corroborated by the BCRP and other independent agencies. There have been some complaints about the veracity of the poverty figures put out by the INEI, but so many other figures indicate that the country is growing wealthier year after year, and that poverty is dropping.

All I am trying to point out is that, unlike what seems to be a common opinion on this board, Peruvians are not verging on a credit default, and more people are working (and paying taxes!) than ever before. Of course we are a tiny economy that can do nothing to change the vagaries of the global currency movements, but Peru has done the absolute best under the circumstances and has proportionally healthy reserve requirements to stave off the worst short term impact. Investment is coming in, we are exporting more, AND IMPORTING MORE!

Even if the US policies end up reducing the value of their own currency in this print-fest they have going on, the global shock will cause the Peruvian currency to drop too. We are a pro-cyclic economy here, and if the USA stops importing goods from china, made with Peruvian raw materials, the price of raw materials drops, and eventually Peru, and the nuevo sol, takes a hit.

Please don´t misunderstand me. I don´t discount that we live in "interesting times" globally, but Peru is doing very well under the circumstances.

Invest in Peru!


Problem is you're wearing the same glasses people wore in the States right up until the financial collapse, I'm not saying Peru's economy will collapse but there will be a down turn, sooner or later due to what I already explained, and sadly as usual, is the regular people who will pay dearly.
Let the "good times" roll and time will tell...soon enough. :roll:
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Fri Dec 10, 2010 1:18 pm

JoshuS wrote:
Alan wrote:
JoshuS wrote:]

Peru may have diversified its exports through FTAs, but at what cost? This is not part of the discourse either, again cui bono? What kind of policies were implemented to ensure a more fair distribution of FTA profits? Last year, only a handful of people benefited.
Without rosy glasses, a trade currency war is being waged against Peru, a war most Peruvians will definitely not win.



Well, at least I am wearing glasses. I´d invite you to travel north to Trujillo to visit some of the huge industrial farms that are employing tens of thousands of people, all on planilla. Or go south to Ica where land owners are complaining that they cannot find laborers.

And if you prefer not believe statistics that show that poverty has dropped roughly 20% in the past 20 years, and continues to drop, that´s your choice. But I prefer to work with the information at hand which is corroborated by the BCRP and other independent agencies. There have been some complaints about the veracity of the poverty figures put out by the INEI, but so many other figures indicate that the country is growing wealthier year after year, and that poverty is dropping.

All I am trying to point out is that, unlike what seems to be a common opinion on this board, Peruvians are not verging on a credit default, and more people are working (and paying taxes!) than ever before. Of course we are a tiny economy that can do nothing to change the vagaries of the global currency movements, but Peru has done the absolute best under the circumstances and has proportionally healthy reserve requirements to stave off the worst short term impact. Investment is coming in, we are exporting more, AND IMPORTING MORE!

Even if the US policies end up reducing the value of their own currency in this print-fest they have going on, the global shock will cause the Peruvian currency to drop too. We are a pro-cyclic economy here, and if the USA stops importing goods from china, made with Peruvian raw materials, the price of raw materials drops, and eventually Peru, and the nuevo sol, takes a hit.

Please don´t misunderstand me. I don´t discount that we live in "interesting times" globally, but Peru is doing very well under the circumstances.

Invest in Peru!


Problem is you're wearing the same glasses people wore in the States right up until the financial collapse, I'm not saying Peru's economy will collapse but there will be a down turn, sooner or later due to what I already explained, and sadly as usual, is the regular people who will pay dearly.
Let the "good times" roll and time will tell...soon enough. :roll:


Joshsu, you are wearing the same glasses as I. :-).

Despite all the production in Peru and in the North there is an outflow of capital to foreign investors , but internally there is consumption fueled by credit and not by adequate pay for the common worker.
We are already seeing growth pains in Peru. Bank delinquencies etc....

GDP in Peru is driven by internal demand/ fueled by available credit.

The only people prospering in Peru are the Chileans and outside investors. The crisis in the US was not caused by production but over consumption/credit. This is certainly happening in Peru. Wages have not gone up , but to satisfy the masses they have give them credit cards/loans to project a false sense of wealth, while the capitalist are feeding on their future wages and salaries like sharks.

I am not an outsider to LIma nor to the Northern provinces (chiclayo). I have seen an investment in property grow from $61.00 M2 (2007) to $450 M2 (2010). Dejavu all over again! I was lucky to sell my property in LA in 2005 before the mortgage crisis in the states (thanks to my ex).

There is a good book that I read back in 1976 "Ëconomics of the Ghetto".

In summary:

One works ina factory and brings home a wage, that wage then goes to purchases/landlords outside the ghetto. The wealth flows out and is not reinvested internally. The landlord and the factory for which a person works get the money back in the form of buying his employers product or the outflow of money to external enterprises.

I see this happening in Peru. This is even more pronounce in a recent artricle which says that many community bodegas are going out of business because of Mega-stores (Tottus, wong, Metro etc...).

Yes, everything is booming in Peru but the common people are marching to a different beat .
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Re: 3rd Most Dynamic City -Lima

Postby JoshuS » Fri Dec 10, 2010 4:52 pm

tupacperu wrote:
Joshsu, you are wearing the same glasses as I. :-).

Yes, everything is booming in Peru but the common people are marching to a different beat .


Actually I don't wear any type of "glasses", so I can see things as they are, but one thing is for sure, we both seem to have "fallen down the rabbit hole" a long time ago,and know how deep it goes. :D

"Morpheus: The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work... when you go to church... when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.
Neo: What truth?
Morpheus: That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind. "
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Re: 3rd Most Dynamic City -Lima

Postby mahou123 » Sat Dec 11, 2010 4:00 am

Such analysis somehow lacks historical perspective. Lima already was most dynamic city, on more than one occasion. Just walking around Lima, one can see that there was a lot of money made in this town, in different points in time. Probably was the world's wealthiest city at some stage. Yet it's still third world and just $5k per capita GDP, not impressive at all. Estimating 'poverty' at 30% is not very honest and nice: by modern standards of living, available in countries to visit which Peruvians require and usually don't get a visa, it is obvious that most people are poor. Offer a Peruvian an opportunity to move to Miami, and practically anyone will jump on it. But anyway, while it is a common understanding that things are looking good right now for Peru, it is also clear that it had its ups and downs before, and I don't see the reason why current 'up' will not be followed by 'down' as it always happened in the past. Investing in such conditions is only recommendable in businesses with long history that pay good dividend income, while bubbles like real estate, mining projects and consumer spending will eventually have somebody who was the last one to get in. And even so, it's probably too late by now.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Sat Dec 11, 2010 11:01 am

mahou123 wrote:Such analysis somehow lacks historical perspective. Lima already was most dynamic city, on more than one occasion. Just walking around Lima, one can see that there was a lot of money made in this town, in different points in time. Probably was the world's wealthiest city at some stage. Yet it's still third world and just $5k per capita GDP, not impressive at all. Estimating 'poverty' at 30% is not very honest and nice: by modern standards of living, available in countries to visit which Peruvians require and usually don't get a visa, it is obvious that most people are poor. Offer a Peruvian an opportunity to move to Miami, and practically anyone will jump on it. But anyway, while it is a common understanding that things are looking good right now for Peru, it is also clear that it had its ups and downs before, and I don't see the reason why current 'up' will not be followed by 'down' as it always happened in the past. Investing in such conditions is only recommendable in businesses with long history that pay good dividend income, while bubbles like real estate, mining projects and consumer spending will eventually have somebody who was the last one to get in. And even so, it's probably too late by now.



Good points all. Just to clarify, "poverty" is a World Bank standard, not my own. It means $2 a day consumption in goods and services. It is a level that needs to, and ought to, improve. The point of $5000 per capita is that this is a trigger figure that companies look to in order to begin investing in developing countries, which ought to create more wealth.

Of course economies are cyclical, but I really see no evidence that says we are in a bubble, where things are overvalued, but rather we are currently in a historically strong position that ought to continue to grow when the global economy recovers. I wonder if the same voices of dissent ("it´s too late to invest") were heard in South Korea in the 1970's, or in China in the 1990's.

Saludos,
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Sat Dec 11, 2010 4:44 pm

I don't think economies are cyclic in the sense that there is a set rhythm to the ups and downs. Thinking there is is the oldest investment mistake in the book. Just as its a common mistake to think that things must carry on going up, there is the equally common mistake thinking that things must fall if they have gone up for a certain length of time.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Sat Dec 11, 2010 8:36 pm

tomsax wrote:I don't think economies are cyclic in the sense that there is a set rhythm to the ups and downs. Thinking there is is the oldest investment mistake in the book. Just as its a common mistake to think that things must carry on going up, there is the equally common mistake thinking that things must fall if they have gone up for a certain length of time.


Wise words, but what of demographics, and the ups and downs of birth patterns? Post war baby boom fueled the US economy for example. Peru had it´s own baby boom 30 years ago, and that is helping move our current economy. Meanwhile, a shrinking group in Peru is now toddlers, and a growing - but still small group - are seniors.

I believe it was Mark who offered folks on this board a copy of a Peruvian consumer lifestyle report. It was very good and dealt a lot with these figures.

Best to all,
Alan
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Re: 3rd Most Dynamic City -Lima

Postby mahou123 » Sat Dec 11, 2010 9:34 pm

Alan wrote: Just to clarify, "poverty" is a World Bank standard, not my own. It means $2 a day in goods and services. Obviously, that needs too, and ought, to improve.


Exactly. These guys probably consider anyone with $3 a day to spend being a 'middle class'. And if the USD collapses or heavily inflated, they will be pleased to inform about total eradication of poverty in the world, as anybody who hasn't starved to death yet would spend much more than 2 dollars.

Alan wrote: Of course economies are cyclic, but I really see no evidence that says we are in a bubble, where things are overvalued, but rather we are currently in a historically strong position that ought to continue to grow when the global economy recovers. I wonder if the same voices of dissent ("it´s too late to invest") were heard in South Korea in the 1970's, or in China in the 1990's.



I see some signs. Land values are clearly in bubble, a lot of land is up for sale everywhere and prices increased several times in last few years. Prices of food, like fish and meat, increased dramatically too, about tripled in last 5 years. I spent some time in Poland recently, and found it cheaper to live than provincial Peru (at least Chiclayo). It is not supposed to be like that. Also, been to Argentina recently, and it is much cheaper than Peru in terms of food. Almost everybody uses credit cards in Peru now, and this is not a healthy sign.

I'm not saying it's supposed to be a top, it can go much higher still. You can still buy an ocean-view apartment in Miraflores and see it doubled in price in a year, who knows. Just seems risky, I'd stay away.

As for comparison with Korea and China, those two have economies based on export of manufactured goods. Peru rather goes together with mining, things are usually good when metals are in bull market (like now) and turn sour when they are not (like in 1980ies - 90ies). The difference of situation now, there is a growing mistrust in USD and any paper currency, expectations of high inflation. This can keep precious metals and any commodities in fact, valuable for longer. Peruvian mines may have ever increasing value of their output, and all figures in USD will be very good for Peru. If gold and silver become main reference for value of things, Peru has plenty of both.

There is a serious cultural issue in Peru and Latin America in general, which translates into corporate governance. Unlike Asians, Peruvians are not oriented towards long time partnerships, and level of trust between partners is usually very low. Also, legal infrastructure in Peru means that enforcing contract obligations is very difficult. There are many companies with promising businesses, in which main shareholders fight each other for years, as a result share price goes nowhere. Generally, one of the main topics discussed by Peruvians, is a story of being robbed or ripped off by the people they trusted or were in some business with, including governments. It happens all the time. This I think is a more important thing to consider when investing in Peru. Macro situation can be good, but growing corruption, crime and civil unrest (and all that is on the rise indeed) can make it pointless to invest.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Sun Dec 12, 2010 2:30 pm

Mahou, you bring up some very good points about some of the negative aspects of investing in Peru. The question they beg is: can some of these issues (distrust, corruption) change over time? Pretty unlikely in the mid-term, right? But still, there have been important shifts in Peru that ought to have a positive effect overall. Particularly, in the past 30 years, Peru has gone from being a mostly rural, mostly disconnected nation, to an urban, increasingly connected nation. There is also a rising rate of literacy, and from 2005 Peru has had truly universal suffrage (police and military received the vote in 2005, and illiterates in 1979). My own take on that is that these are an important steps on the road to cultural homogenization that you mention, which hopefully will be one of the seeds of trust-building.
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Sun Dec 12, 2010 7:26 pm

Alan wrote:
tomsax wrote:I don't think economies are cyclic in the sense that there is a set rhythm to the ups and downs. Thinking there is is the oldest investment mistake in the book. Just as its a common mistake to think that things must carry on going up, there is the equally common mistake thinking that things must fall if they have gone up for a certain length of time.


Wise words, but what of demographics, and the ups and downs of birth patterns? Post war baby boom fueled the US economy for example. Peru had it´s own baby boom 30 years ago, and that is helping move our current economy. Meanwhile, a shrinking group in Peru is now toddlers, and a growing - but still small group - are seniors.

I believe it was Mark who offered folks on this board a copy of a Peruvian consumer lifestyle report. It was very good and dealt a lot with these figures.

Best to all,
Alan


I think the last lot of post by you and Mahou have been a very interesting discussion on the fundamentals of the Peruvian economy. On democraphics I'm sure the things you are talking about would account for a proportion of the economic growth but the question is how much of the rest is really sustainable or only froth which will corrected for later on.

Here's a graph of historic GDP according to the IMF. It indicates an almost doubling of GDP in the last 10 years. That looks pretty impressive though I'm not sure how that compares with the drop in purchasing power of the dollar in Peru!

http://www.tradingeconomics.com/peru/gd ... -data.html

Unfortunately I know very little about the fundamentals of the Peruvian economy. But it looks like you are in good (or bad!) company Alan, as the IMF seems to be projecting the recent growth rate will continue for the next six years. But of course they can be a wrong as anyone else!
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Sun Dec 12, 2010 8:24 pm

Newton's law: what goes up must come down.
Last edited by tupacperu on Sun Dec 12, 2010 9:01 pm, edited 1 time in total.
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Sun Dec 12, 2010 9:00 pm

tomsax wrote:I don't think economies are cyclic in the sense that there is a set rhythm to the ups and downs. Thinking there is is the oldest investment mistake in the book. Just as its a common mistake to think that things must carry on going up, there is the equally common mistake thinking that things must fall if they have gone up for a certain length of time.



The GDP in Peru is driven by internal demand. SO, it increases because as Peru become open economically, credit opens up for the working class. Look at any article on Peru's GDP and you will find (internal demand- a major factor/credit), contributing factors in the doubling of GDP.

As far as cyclic economies:
The term “business cycle” refers to the cyclic nature of economic activity.

That is why they say buy when investments are down, sell when investments are up.
Many get caught up in buying when investment are near peak (buying frenzy), only to lose the shirt off their back. I have halted further investment in Peru and am purchasing real estate in the US in a down market.
As Mahou mentioned there are many places more affordable to live in other parts of the world. I am seeing this in Phoenix 3000 sq ft homes for $150K. Makes me think about selling my home in Pimentel and staying in the USA. If it were not for the potential beach rental income, I would have it up for sale right now.
The other factor is braising crimes that are occurring in Peru, there is no sense of order or respect for the law. I have not been a victim of any crime in Peru for the past 7 years, but is scares me to have a nice home on the beach which will have to be fortified with security.

Peru is peaking and also the political landscape will change in 2011, many factors go into why Peru cannot sustain the current doubling of GDP year upon year. If Humala by some far chance wins, capitalist will flee Peru and cut their loses. So do not believe in the surveys coming out of Peru. I was surprised when Villaran won Mayor and am sitting on pins and needles for April 2011.




What Does Business Cycle Mean?
The recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the business are growth (expansion), peak, recession (contraction), trough and recovery. At one time, business cycles were thought to be extremely regular, with predictable durations, but today they are widely believed to be irregular, varying in frequency, magnitude and duration.

Business cycle Graph: Economies are cyclic:
http://econintersect.com/wordpress/wp-c ... -20103.png
http://static.seekingalpha.com/uploads/ ... origin.jpg
http://static.seekingalpha.com/uploads/ ... origin.jpg
http://static.seekingalpha.com/uploads/ ... origin.jpg

Newton's law: what goes up must come down.
Last edited by tupacperu on Sun Dec 12, 2010 9:38 pm, edited 2 times in total.
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Re: 3rd Most Dynamic City -Lima

Postby alan » Sun Dec 12, 2010 9:14 pm

tupacperu wrote:The GDP in Peru is driven by internal demand. SO, it doubles because as Peru become open economically, credit opens up for the working class. Look at any article on Peru's GDP and you will find 2 caveats (internal demand-credit and coca products), these are contributing factors in the doubling of GDP. But just as China is prospering they are having issue with property speculators and investors.


Coca brings in an estimated (macroconsult) 1.5 billion a year, of which only 400,000,000 stays in Peru. That doesn´t seem to be significant in light of a 150billion gdp. While credit might be on the rise, it is still within proportion to the overall size of the economy. I am not sure if you have tried to get a mortgage here Tupac, but banks are not lining up to throw money at you, and rates are relatively high.

Which are the credit figures that have you so worried?

tupacperu wrote:Peru is peaking and also the political landscape will change, many factors go into why Peru cannot sustain the current doubling of GDP year upon year.

Probably a typo on your part, since I think you know that the GDP hasn't doubled year after year. While Peru has undoubtedly come from a low base point when you consider 3 lost decades from the 60´s through the 80´s, the last few years gdp growth has ranged from 6 to 9% per year. High, but why shouldn´t it be sustainable over the mid-term? Peru is living a period of political stability, solid mineral prices, trade agreements, and a young population who will work had and consume, and not have to spend tons of money supporting retirees (like Europe, Japan, or North America).

I don´t think my enthusiasm is naive. The positive indicators outweigh the negative.

Cheers,
Alan


tupacperu wrote:Newton's law: what goes up must come down.

That´s a good rule to remember if you are walking under a ladder, but not so wise when investing in stocks or real estate which have a tendency to increase consistently over time.
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Sun Dec 12, 2010 9:29 pm

Alan wrote:
tupacperu wrote:The GDP in Peru is driven by internal demand. SO, it doubles because as Peru become open economically, credit opens up for the working class. Look at any article on Peru's GDP and you will find 2 caveats (internal demand-credit and coca products), these are contributing factors in the doubling of GDP. But just as China is prospering they are having issue with property speculators and investors.


Coca brings in an estimated (macroconsult) 1.5 billion a year, of which only 400,000,000 stays in Peru. That doesn´t seem to be significant in light of a 150billion gdp. While credit might be on the rise, it is still within proportion to the overall size of the economy. I am not sure if you have tried to get a mortgage here Tupac, but banks are not lining up to throw money at you, and rates are relatively high.

Which are the credit figures that have you so worried?

tupacperu wrote:Peru is peaking and also the political landscape will change, many factors go into why Peru cannot sustain the current doubling of GDP year upon year.

Probably a typo on your part, since I think you know that the GDP hasn't doubled year after year. While Peru has undoubtedly come from a low base point when you consider 3 lost decades from the 60´s through the 80´s, the last few years gdp growth has ranged from 6 to 9% per year. High, but why shouldn´t it be sustainable over the mid-term? Peru is living a period of political stability, solid mineral prices, trade agreements, and a young population who will work had and consume, and not have to spend tons of money supporting retirees (like Europe, Japan, or North America).

I don´t think my enthusiasm is naive. The positive indicators outweigh the negative.

Cheers,
Alan


tupacperu wrote:Newton's law: what goes up must come down.

That´s a good rule to remember if you are walking under a ladder, but not so wise when investing in stocks or real estate which have a tendency to increase consistently over time.


Mortgages are ez in Peru. I was offered a loan on the construction of my home about a year ago and I had no Carnet. I also got a letter of credit in 2007 to buy an apartment in Miraflores. Credit is even easier in 2010 (home, auto and household goods)


This is from another thread I posted:

For BCR, there are banks that have a higher interest rate because they perceive a higher default.

LIMA | The president of the Central Reserve Bank (BCR), Julio Velarde, turned on the amber light to indicate that credit in Peru growing twice the increase of Gross Domestic Product (GDP).

Story on EZ Credit in Peru:
http://translate.google.com/translate?u ... =&ie=UTF-8
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Mon Dec 13, 2010 7:29 am

tupacperu wrote:[At one time, business cycles were thought to be extremely regular, with predictable durations, but today they are widely believed to be irregular, varying in frequency, magnitude and duration.



Exactly, so how do you know that we are near the peak in Peru. It could be a year from now, two years or 5 or more years from now. Business cycles tend to look much more predictable in hindsight. Putting it another way, will you still be saying things are near their peak a year from now, two years from now etc. I think many people were saying things were at their peak in Peru a year ago, two years ago or more. In fact, I think I might have said it. But, economies are by their nature unpredictable.
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Re: 3rd Most Dynamic City -Lima

Postby Kelly » Mon Dec 13, 2010 8:02 am

I think many people were saying things were at their peak in Peru a year ago, two years ago or more


And when the Peru economy does fall, whether it's tomorrow or 10 years from now, those people will all say "See? I told you!"

Even a stopped clock is right twice a day. :lol:
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Re: 3rd Most Dynamic City -Lima

Postby alan » Mon Dec 13, 2010 10:47 am

tupacperu wrote:
Mortgages are ez in Peru. I was offered a loan on the construction of my home about a year ago and I had no Carnet. I also got a letter of credit in 2007 to buy an apartment in Miraflores. Credit is even easier in 2010 (home, auto and household goods)


This is from another thread I posted:

For BCR, there are banks that have a higher interest rate because they perceive a higher default.

LIMA | The president of the Central Reserve Bank (BCR), Julio Velarde, turned on the amber light to indicate that credit in Peru growing twice the increase of Gross Domestic Product (GDP).

Story on EZ Credit in Peru:
http://translate.google.com/translate?u ... =&ie=UTF-8


Interesting points, Tupac. It will be interesting to watch the evolution of what you mention. The system of bonuses among bank managers builds risk right into the system. They earn bonuses after the good years, but don´t pay penalties when things to to hell in a hand basket.
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Re: 3rd Most Dynamic City -Lima

Postby Alpineprince » Mon Dec 13, 2010 2:27 pm

Alan wrote:
tupacperu wrote:The GDP in Peru is driven by internal demand. SO, it doubles because as Peru become open economically, credit opens up for the working class. Look at any article on Peru's GDP and you will find 2 caveats (internal demand-credit and coca products), these are contributing factors in the doubling of GDP. But just as China is prospering they are having issue with property speculators and investors.


Coca brings in an estimated (macroconsult) 1.5 billion a year, of which only 400,000,000 stays in Peru. That doesn´t seem to be significant in light of a 150billion gdp. While credit might be on the rise, it is still within proportion to the overall size of the economy. I am not sure if you have tried to get a mortgage here Tupac, but banks are not lining up to throw money at you, and rates are relatively high.

Which are the credit figures that have you so worried?

tupacperu wrote:Peru is peaking and also the political landscape will change, many factors go into why Peru cannot sustain the current doubling of GDP year upon year.

Probably a typo on your part, since I think you know that the GDP hasn't doubled year after year. While Peru has undoubtedly come from a low base point when you consider 3 lost decades from the 60´s through the 80´s, the last few years gdp growth has ranged from 6 to 9% per year. High, but why shouldn´t it be sustainable over the mid-term? Peru is living a period of political stability, solid mineral prices, trade agreements, and a young population who will work had and consume, and not have to spend tons of money supporting retirees (like Europe, Japan, or North America).

I don´t think my enthusiasm is naive. The positive indicators outweigh the negative.

Cheers,
Alan


tupacperu wrote:Newton's law: what goes up must come down.

That´s a good rule to remember if you are walking under a ladder, but not so wise when investing in stocks or real estate which have a tendency to increase consistently over time.

I read today that:
Peruvian exports to Germany in January-September 2010 amounted to US$ 1.09 billion, an increase of 57 percent compared to 2009 (US$ 701.2 million).

Imports increased by 23 percent to US$ 680 million.

It is considered healthy when you are exporting almost twice as much as you are importing. Europeans consider Organic Peruvian coffee to be amongst the best in the world and it will make up a higher percentage of exports in the future.
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Wed Dec 15, 2010 10:53 am

Kelly wrote:
I think many people were saying things were at their peak in Peru a year ago, two years ago or more


And when the Peru economy does fall, whether it's tomorrow or 10 years from now, those people will all say "See? I told you!"

Even a stopped clock is right twice a day. :lol:


My point is, it may take 10 years, but it will happen, Are you prepared?
It happened suddenly in the USA, and it can happen in Peru too.
Peru is not an island economy, though internal demand is what has driven Peru's economy at the price of ez credit and mineral comodities.
My point is unlike Brazil, Chile which have industrial technlogical advances to support their economies, Peru is dependent on outside enterprises and investors, which will impact the economy should there be a global downturn. Chile and Brazil are heavily invested in Peru. but where is Peru invested externally? Peru is invested in it's internal economy.

My point is that Peru's economy is not diversified enough to deal with the next global downturn.

More on overdue debt in Peru:

http://translate.google.com/translate?u ... =&ie=UTF-8
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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Wed Dec 15, 2010 11:34 am

Alpineprince wrote:
Alan wrote:
tupacperu wrote:The GDP in Peru is driven by internal demand. SO, it doubles because as Peru become open economically, credit opens up for the working class. Look at any article on Peru's GDP and you will find 2 caveats (internal demand-credit and coca products), these are contributing factors in the doubling of GDP. But just as China is prospering they are having issue with property speculators and investors.


Coca brings in an estimated (macroconsult) 1.5 billion a year, of which only 400,000,000 stays in Peru. That doesn´t seem to be significant in light of a 150billion gdp. While credit might be on the rise, it is still within proportion to the overall size of the economy. I am not sure if you have tried to get a mortgage here Tupac, but banks are not lining up to throw money at you, and rates are relatively high.

Which are the credit figures that have you so worried?

tupacperu wrote:Peru is peaking and also the political landscape will change, many factors go into why Peru cannot sustain the current doubling of GDP year upon year.

Probably a typo on your part, since I think you know that the GDP hasn't doubled year after year. While Peru has undoubtedly come from a low base point when you consider 3 lost decades from the 60´s through the 80´s, the last few years gdp growth has ranged from 6 to 9% per year. High, but why shouldn´t it be sustainable over the mid-term? Peru is living a period of political stability, solid mineral prices, trade agreements, and a young population who will work had and consume, and not have to spend tons of money supporting retirees (like Europe, Japan, or North America).

I don´t think my enthusiasm is naive. The positive indicators outweigh the negative.

Cheers,
Alan


tupacperu wrote:Newton's law: what goes up must come down.

That´s a good rule to remember if you are walking under a ladder, but not so wise when investing in stocks or real estate which have a tendency to increase consistently over time.

I read today that:
Peruvian exports to Germany in January-September 2010 amounted to US$ 1.09 billion, an increase of 57 percent compared to 2009 (US$ 701.2 million).

Imports increased by 23 percent to US$ 680 million.

It is considered healthy when you are exporting almost twice as much as you are importing. Europeans consider Organic Peruvian coffee to be amongst the best in the world and it will make up a higher percentage of exports in the future.


Peru is running a trade deficit in 2010.
Which means it imports more than it exports.
The raw material Peru exports returns in the form of products which cost more (lemons to lemonade).
Which means that money flows out of Peru. Just a Michael Porter mentioned. "Peru needs to invest a dynamic economy". (paraphrased).
Peru's raw materials are slated for export becasue they bring a higher price when exported and not sold nationally.
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Re: 3rd Most Dynamic City -Lima

Postby tomsax » Wed Dec 15, 2010 12:05 pm

tupacperu wrote:Peru is running a trade deficit in 2010.
Which means it imports more than it exports.
The raw material Peru exports returns in the form of products which cost more (lemons to lemonade).
Which means that money flows out of Peru. Just a Michael Porter mentioned. "Peru needs to invest a dynamic economy". (paraphrased).
Peru's raw materials are slated for export becasue they bring a higher price when exported and not sold nationally.


According to Bloomburg and Wikipedia, Peru had a trade surplus in 2010.

http://www.bloomberg.com/news/2010-12-1 ... ate1-.html

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Re: 3rd Most Dynamic City -Lima

Postby tupacperu » Wed Dec 15, 2010 12:58 pm

tomsax wrote:
tupacperu wrote:Peru is running a trade deficit in 2010.
Which means it imports more than it exports.
The raw material Peru exports returns in the form of products which cost more (lemons to lemonade).
Which means that money flows out of Peru. Just a Michael Porter mentioned. "Peru needs to invest a dynamic economy". (paraphrased).
Peru's raw materials are slated for export becasue they bring a higher price when exported and not sold nationally.


According to Bloomburg and Wikipedia, Peru had a trade surplus in 2010.

http://www.bloomberg.com/news/2010-12-1 ... ate1-.html

Tom


That is for the month of October 2010 only : overall 2010 figures come at end of year (Feb-March 2011).

With so much good economic news, you need to look for symptoms of things to come.

Economics 101:

GDP growth is a commonly used to gauge how well the economy is doing, and/or productivity growth. It measures the internal demand within Peru and gives the government an idea of inflation and unemployment rates. Export growth has helped contribute to Peru's overall GDP increase. Both government consumption and private consumption have fueled spending and in the process, expanded the economy. However, as domestic demand increases, the trade deficit within Peru also increases.


Peru has a Fiscal Deficit also, International debt: Bloomberg
http://www.bloomberg.com/news/2010-09-1 ... ation.html

Economic growth decelerated to 9.1 percent in July 2010 from a year earlier, compared with 11.9 percent in June 2010, as the government tempered the pace of spending on goods and services and investment in public works.

http://www.bloomberg.com/news/2010-09-1 ... ation.html

The economy in Peru is being supported by Stimulus packages:

The 2011 budget, drawn up under Benavides’ predecessor Mercedes Araoz, will rise 8 percent from this year to 88.5 billion soles. The government targets a 1 percent fiscal deficit in 2011, compared with a 1.5 percent deficit this year.

http://www.livinginperu.com/news-13642- ... 011-budget
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Re: 3rd Most Dynamic City -Lima

Postby FHCZ » Wed Dec 15, 2010 3:17 pm

tupacperu wrote:


Peru is running a trade deficit in 2010.
Which means it imports more than it exports.


The 2011 budget, drawn up under Benavides’ predecessor Mercedes Araoz, will rise 8 percent from this year to 88.5 billion soles. The government targets a 1 percent fiscal deficit in 2011, compared with a 1.5 percent deficit this year.


Peru is targeting a fiscal deficit for 2010, but is projecting a trade surplus (more exports than imports) for 2010

Fausto

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